Office of Bar Counsel

• Publication year: 2022
• Pages: 10

Office of Bar Counsel Vol. 45 No. 4 Pg. 10 Wyoming Bar Journal August, 2022

Ethical Considerations in Flat Fee Arrangements Revisited¹

Melinda S. McCorkle, J.

Wyoming State Bar Office of Bar Counsel Cheyenne, Wyoming

Flat fees² are based upon a seemingly simple and often mutually advantageous premise. The client receives the benefit o: knowing in advance the cost of the service requested. Because these fees, or portions thereof, are usually due at the commencement of representation, the lawyer has certainty that the amount due ii paid. Thus, a contract between lawyer and client is formed. However this ostensibly straightforward agreement may be complicated bi unanticipated factors, particularly when representation terminate; prior to completion of the service. In such a case, is the attorney entitled to keep the entire fee or only a portion thereof, and if so, how is that determined? Or is a flat fee "nonrefundable" and "earned upon receipt," as is often asserted in the representation agreement?

Flat fee agreements, like other representation agreements, are contract-based, but unlike most contracts, the "four corners" of the contract do not govern all aspects of the agreement The agreement, and actions taken thereof, must still conform to the Wyoming Rules of Professional Conduct. The lawyer-client relationship implicates additional duties not typically found in a contract; thus, the lawyer must be mindful that special consideration; apply to fee arrangements between lawyers and clients:

Contractual clauses for payment of attorneys' fees are "generally a matter of agreement between the lawyer and client." In re Hellerud, 714 N.W.2d at 41. However, "[t]he reasonableness of a fee is not measured solely by examining its value at the outset of the representation; indeed an otherwise-reasonable fee can become unreasonable if the lawyer fails to earn it." Attorney Grievance Comm'n of Maryland v. Garrett, 427 Md. 209, 46 A.3d 1169, 1178 (2012). Attorneys' duties to clients can exceed the duties of parties under contract law. This is because the attorney-client relationship is a fiduciary relationship of trust and confidence. Lee v. LPP Mortg. Ltd., 2003 WY 92, ¶21, 74 P.3d 152, 160 (Wyo. 2003); Bevan v. Fix, 2002 WY 43, ¶ 53,42 P.3d 1013,1029 (Wyo. 2002).³

Consequently, if questioned, the attorney must be prepared to demonstrate that the flat fee paid was earned and not unreasonable. For the most part, if the service is performed and the fee paid, the contract has been fulfilled by both parties, and in all but rare circumstances, the fee need not be revisited. However, when the lawyer does not complete the contract-ed-for service but retains the fee, a dispute is likely to arise. The dispute may result in the filing of a complaint with the Office of Bar Counsel, a Petition for Fee Arbitration.⁴ or both. In either case, it is up to the attorney to demonstrate that the fee is reasonable⁵ and thus complies with the ethical duties to which an attorney is bound.

Rule 1.5 (Fees) mandates that a lawyer "shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses."⁶ It further identifies several factors to be considered in determining whether the fee is reasonable:

1. the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;

2. the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;

3. the fee customarily charged in the locality for similar legal services;

4. the amount involved and the results obtained;

5. the time limitations imposed by the client or by the circumstances;

6. the nature and length of the professional relationship with the client;

7. the experience, reputation, and ability of the lawyer or lawyers performing the services; and

8. "whether the fee is fixed or contingent.⁷

Comment 4 to Rule 1.5 states, "A lawyer may require advance payment of a fee, but is obliged to return any unearned portion. See Rule 1.16(d)."

Rule 1.16 (Declining or Terminating Representation) governs circumstances in which an attorney "shall" or "may" decline or terminate representation.⁸ An often-overlooked provision in Rule 1.16 governs the obligation to return an unearned fee...